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Some of the finer details of MLS System Seller Brokerage Contracts

Locally, we've recently had a lot of conversations about Seller Brokerage Contracts. What these are are the contracts that is agreed to by a Seller of property and the brokerage through the brokerage's agent to allow them to market the property on behalf of the Seller. Specifically our discussion have revolved around, the agreement regarding the real estate professional's obligations and the consumer's obligations regarding to their property when it is being listed for sale within the local MLS® System.

Firstly, there are several weaknesses that creep up as a result of Provincial Standard Forms. One of them is that they cater to the lowest standard of care.

One of the notorious weaknesses has been in detailing some of the individual real estate board rules that govern how the various MLS Systems in the province run. A few years ago in this province there were Harmonized MLS System Rules agreed to by all real estate boards in the province (which are still in place), but alas, they too didn’t deal with some of the minutia that needs to be addressed by local agents looking after local clients through the local MLS System. Every local board would have their own minor set of rules that would not conflict with the provincial agreement. (Other jurisdictions have their own rules.)

In our brokerage meeting this week, it was brought up by an associate that consumers know full-well what they are signing. Based on my experiences with both first-time buyers and sellers but mostly with experienced buyers and sellers, I had to disagree. One of the main reasons consumers hire real estate professionals is for their advice. The second is because they are supposed to have the knowledge to ensure a mostly uneventful transaction — i.e. as much of a flaw-free process as can be expected. Do they always read our contracts cover-to-cover prior to signing them? No — rarely, in fact. It really is surprising to even get a single question. Do their eyes gloss over when we try to explain them? You bet. Especially the ones that have been written in "plain-English." Boy, what a failed experiment that has been.

In fact, so many consumers mistakenly believe there is just one MLS System and you can see it at realtor.ca (previously known as mls.ca). Wrong. There are over 100 independent MLS Systems withing Canada. Each is operated by a real estate board or a group of boards. Sure, all the MLS Systems feed a small amount of data into that website (realtor.ca), but the information, while accurate, is not timely, nor complete. The real purpose of realtor.ca is to expose the sellers' listings to the consumer and drive those consumers back to the agents that have those properties listed for sale (which would thereby completely circumvent the interests of a prospective buyer consumer in having their own fiduciary representative in the transaction.)

So, for a seller to have their property included in the local Calgary MLS System within the Seller Brokerage Agreement are a few items delineated within the contract:

To be included in the Calgary MLS System, the MLS portion of the listing period must be a minimum of 60 days.

The Seller must provide compensation for cooperating licensed brokers for the sale of the property.

The Seller must not exclude any licensed industry member from acting as a cooperating broker.

But those aren't all the items that your local real estate broker needs to disclose. There are a number of other items which are also agreed to just by the mere agreement to place the listing on the MLS System.

They include:

That the list price in the MLS System will be the same price as advertised in other media.

That the property must be available for showing within 24 hours of a request to view it being made (with exceptions for tenant occupied properties, or where prohibited by government or court authority). If the home is conditionally sold (and the seller has requested no further showings), then this is an exemption to this rule. Those homes are marked as "P" in our MLS System. While not legally a real pending sale, we consider it one and usually honour the seller's request.

Where there is a secondary suite in the property, it will be disclosed as either legal or illegal in the MLS System.

When a property is sold, the purchase price will be posted in the MLS System within 2 business days. (Not really sure why we allow that much time, but a lot of agents seem to follow that 2 business days almost to the maximum.)

If a lockbox is going to be placed on the listing, then it must be one of our standard digital models that all local associates may access. There is no mention of it, but I expect that if a seller were wishing agents from another board to access the home too, then an older model mechanical lockbox could be used – additionally. A word of caution though – those mechanical lockboxes are far less secure.

Under provincial legislation, the brokerage is required to verify the information provided by the Seller &mdash especially any property details like measurements. The very minimum standard of care is for the real estate broker to verify measurements provided. Many of us hire outside, third-party, services to provide those to us. Obviously, verifying zoning, taxes and restrictions on the property fall under that minimum standard of care too.

When a property is conditionally sold, the Seller has an option to have the home's listing as a pending sale indicating that is no longer an active listing and is no longer available for viewing. Or, the seller can leave the home's listing as still active and available for viewing.

Then, there's the situation regarding the policy regarding competing offers. Clearly the seller has a right to advertise the terms of any offer to purchase with any of the other potential purchasers, however, a real estate broker cannot be party to it. Even though the seller may give the agent clear, written, legal instruction to do so, that is cause to immediately terminate the listing agreement. If the agent does participate in the prohibited practise they could lose their membership in the board and therefore be unable to list properties on the MLS System.

Does a seller need to have their listing on an MLS System? Honestly, no they don't need to. But the vast majority of sales are conducted through the MLS System. The reason: the competitive compensation offer by sellers to the buyer's agent to bring the purchaser. Obviously, while it is possible to do, a seller placing their property listing on a different MLS System (e.g. a Calgary homeowner placing their home's listing on the Red Deer MLS System) would be a foolish endeavour. The benefit of placing the listing into an MLS System is not to get it shown on realtor.ca, but rather to have local agents and local buyers viewing the listing and actively looking at it (virtually and in-person). Local agents rarely look at results from realtor.ca or results from other boards. They can, but they don't due to the probability of finding the right home for their clients.

Do all agents go through all the board's rules which they are obligated to follow with every single client? No. It is a matter of providing timely disclosure. When an issue comes up that may have a bearing on the client's decision then the issue and how the board's rules impact it needs to be discussed. The agent and the seller actually have no obligation to enter the listing into the local MLS System but clearly it's proven to be the most efficient and effective way to get property brokered between buyers and sellers. So if the Seller decides that they can't agree to rule that is part and parcel of the local MLS System, the listing is removed from the MLS System and it is continued to be marketed as an Exclusive "Non-MLS" Listing that the only the listing agent sees. Some sellers would still offer compensation for a cooperative broker, but the likelihood of a cooperative broker (or potential buyers) even hearing about the listing is slim.

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